BM Khaitan group plans to sell stake in Eveready
Scouts for strategic partner; shares jump 18% intra-day on sale talks
The country’s largest dry-cell battery maker, Eveready Industries, has mandated Kotak Mahindra Bank to scout for potential financial or strategic investors. The strategic sale is intended to de-leverage promoter group holding.
One of the oldest consumer brands, the ₹1,500- crore Eveready is the flagship company of the BM Khaitan family-controlled Williamson Magor group. The group consists of McLeod Russel (world’s largest tea planter), McNally Bharat and Kilburn Engineering.
McLeod Russel has also been divesting many of its tea estates in India.
According to market sources, Eveready is open to both foreign and domestic strategic investors, as well as private equity players.
In fact, the company could even look at hiving off its battery unit separately, provided it gets a good price.
The first option will be to dilute the promoter stake in favour of the investor. But, all this depends on the valuation. The promoter group (including the Khaitan family) owns around 44 per cent stake in Eveready.
Williamson Magor directly holds 23.67 per cent in Eveready; and its unit Williamson Financial Services Ltd has 8.79 per cent.
Eveready Industries MD Amritanshu Khaitan was not available for comments.
Market sources say recent valuations of Indian consumer brands have been to the tune of three to four times their turnover.
In this context, the Khatian family could expect an enterprise valuation of around ₹4,000 crore-6,000 crore for Eveready, if not more.
On a standalone basis, the battery division is expected to draw a valuation of ₹3,000 crore. The battery business — its mainstay accounting for ₹1,000 crore of the turnover — has seen flat sales over the last few years primarily on account of increasing Chinese imports.
However, new norms stipulated by the Bureau of Indian standards are expected to boost battery sales.
Of late, the management of Eveready Industries has been trying to convert itself into an FMCG company by diversifying into new areas such as electrical products, small appliances and lighting by following
Market sources said that Eveready is open to both foreign and domestic strategic investors, as well as private equity players
an “asset-light” model. Subsequently, the company diversified into other businesses like LED lights and small appliances. These new verticals are expected to drive future growth of the company.
Potential investors are said to be assessing the Eveready brand value apart from the strong distribution network that the company has built over the years.
Eveready, as a brand, was owned by the erstwhile Union Carbide India since 1905.
The Khaitans had fought a bitter battle with Nusli Wadia’s Bombay Dyeing to acquire Eveready for ₹300 crore in 1993.
De-leveraging balance sheet
The company currently has a beaten down share price, which has more than halved in the past one year.
Sources aware of the development told BusinessLine that the company has also been planning to reduce debt. The company’s debt is said to be around ₹300 crore.
The high debt had often stopped Eveready from getting into new businesses.
In a bid to reduce the debt burden, the company recently sold a land parcel at Chennai for ₹100 crore. Talks are on for selling another land parcel in Hyderabad.
The market has reacted positively to reports of the promoters bringing down their stake in the company. Eveready shares closed at ₹205.20, up by 13.06 per cent, at the BSE, on Friday.
During the day, Eveready shares saw a near 18-per cent jump to ₹214. Nearly, 3.01 lakh shares were traded on the BSE today.
Meanwhile, shares of Willamson Magor & Co Ltd hit the upper circuit and closed at ₹63.60, up by 20 per cent, on the BSE.